Evercore ISI maintained its In Line rating and $64.00 price target for Comerica Incorporated (NYSE:CMA), citing positive expectations for the bank's net interest income (NII) and net interest margin (NIM). Management at Comerica has indicated that the bank is benefiting from ongoing shifts into interest-bearing deposits amidst the current interest rate environment, which is helping to reduce reliance on wholesale funding.
Comerica's management confirmed the paydown of approximately $900 million in higher-cost brokered deposits towards the end of the third quarter of 2024 and anticipates a similar reduction in the fourth quarter. These actions, combined with Comerica's liability sensitivity, are expected to lead to an improvement in the NIM, which is projected to approach 3% in the fourth quarter, up from the current 2.80%.
The bank has observed a cumulative deposit beta of over 60% on wholesale repricing to date. Looking ahead, management has projected a terminal down-rate beta that will range between Comerica's standard beta of approximately 47% and the higher figure of over 60%.
Encouraged by these developments, management expressed a relatively bullish outlook on NII heading into 2025. They expect liquidity increases throughout the coming year, which should positively impact the bank's financial performance.
Comerica Bank reported a third-quarter earnings of $184 million, surpassing expectations. The bank's strong performance was driven by robust customer activity and improved financial metrics, including a 1.3% increase in average deposits and a net interest income of $534 million. Additionally, the bank's tangible book value grew by 23% and the CET1 ratio improved to 11.97%.
Comerica also announced plans for a $100 million stock repurchase in the fourth quarter. However, the bank's outlook for 2024 includes a projected 5% decline in average loans and a 3-4% decrease in average deposits. The bank also anticipates modest growth in the fourth quarter, but expects a 13% to 14% decrease in net interest income for 2024.
InvestingPro Insights
Recent data from InvestingPro adds depth to Evercore ISI's analysis of Comerica Incorporated (NYSE:CMA). The bank's market capitalization stands at $8.65 billion, with a P/E ratio of 14.28, suggesting a relatively modest valuation compared to some peers in the banking sector. This valuation metric aligns with the positive outlook on Comerica's net interest income and margin improvements highlighted in the article.
InvestingPro Tips reveal that Comerica has maintained dividend payments for 54 consecutive years, demonstrating a strong commitment to shareholder returns even in challenging economic environments. This consistency in dividend payments could be particularly appealing to investors seeking stable income streams in the current interest rate landscape.
Additionally, Comerica's stock has shown significant momentum, with a high return over the last year and trading near its 52-week high. The 6-month price total return of 27.09% and 1-year return of 57.42% reflect investor confidence in the bank's strategies, including the management of interest-bearing deposits and reduction of wholesale funding mentioned in the article.
For investors seeking a more comprehensive analysis, InvestingPro offers 8 additional tips for Comerica, providing a deeper understanding of the company's financial health and market position.
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